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Warehouse space snapped up as retailers stockpile supplies, goods

Kristin Schwab Jan 27, 2022
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To avoid supply chain crunches, some businesses are stockpiling goods and supplies — all of which need a place to be stored. Chip Somodevilla/Getty Images

Warehouse space snapped up as retailers stockpile supplies, goods

Kristin Schwab Jan 27, 2022
Heard on:
To avoid supply chain crunches, some businesses are stockpiling goods and supplies — all of which need a place to be stored. Chip Somodevilla/Getty Images
HTML EMBED:
COPY

The pandemic surge in online retail and shopping in general has created a boom in one very specific corner of the real estate market: warehouse space. According to commercial real estate database Real Capital Analytics, warehouse sales hit a record high in 2021.

Sales at Massachusetts candy company CB Stuffer are booming. Its biggest seller is a giant peanut butter cup. When we say “giant,” we mean it.

“It’s the size of an individual pizza. Not recommended to eat by oneself,” said co-owner and operator Erin Calvo-Bacci.

She said that storing all these treats has become more difficult, especially because the company is stockpiling chocolate to avoid supply chain problems as best it can. To make matters worse, Calvo-Bacci lost half her warehouse space; the landlord gave it to a bigger tenant.

Finding additional space has been difficult; she needs an environment that’s temperature-controlled. “Because chocolate naturally does not do well — or a lot of these other ingredients — when it’s too warm,” she explained.

Smaller companies usually rent warehouse space from a logistics company. Those businesses are also scrambling to meet demand by buying more space or building new facilities, said Jim Costello at Real Capital Analytics.

“But yet it hasn’t changed the availability of space. It just keeps getting tighter and tighter,” he said.

And when space is tight, prices go up — by an average of 30% last year, Costello said. Prime space near big shipping ports and major cities is even more scarce, according to Lauren Nichols, president of 3G Warehouse, which has locations in New York, New Jersey and South Carolina.

“You need to know a landlord, you need to have a relationship, because there’s not a lot out there,” Nichols said.

The company is doubling its warehouse space this year, and it’s costing a pretty penny. That cost’s not just in real estate, but also in increased labor costs and materials, like pallets and tape.

“We have not seen any of our revenue streams stay static on the cost side,” Nichols said.

She’s had to pass some of that cost on to retailers — who, in turn, are likely to pass some of it down to consumers.

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